Shaktikanta Das sees V-shaped recovery, growth rate at 7.4% in FY22

By: ENS Economic Bureau | Mumbai |

Updated: April 18, 2020 8:08:48 pm

Reserve Bank of India (RBI) Governor Shaktikanta Das.

Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday projected India’s rapid growth in Kovid-19-hit 7.4 percent in the next fiscal year (2021-22).

He said that for 2021, the IMF forecast a V-shaped recovery of 9 percent points for global GDP. “India is expected to resume the pre-slowdown trajectory of the Kovid-19 with an increase of 22 percent in 2021,” Das said at a media conference forecasting a rapid economic recovery in the next financial year.

Economists, global banks and rating agencies recently predicted India to grow below 2 percent in 2020. “India is one of the countries projected to grow at a positive rate of 1.9 percent (for 2020). In fact, it is the highest growth rate among the G20 economies, ”said Das.

On the performance of the economy, the governor said, “Since March 27, 2020, the macroeconomic and financial landscape has deteriorated in some areas; But the light is still shining bravely in some others. “

According to him, early developments suggest that inflation is declining, a 170 basis point drop from the peak of January 2020. In the period ahead, inflation may decline even further, causing a supply disruption shock and well below the 4 percent target by the second half of 2020-21. “Such an approach would provide policy space to address the intensification of risks to growth and financial stability brought by COVID-19. This space needs to be used effectively and on time, ”said Das.

Das said that a contraction of 34.6 percent in exports in March 2020 was more severe than in the global financial crisis. The World Trade Organization has contracted global trade trade by 13–32 percent in 2020. Global financial markets remain volatile, and emerging market economies grapple with capital outflows and volatile exchange rates.

However, disruptions caused by Kovid-19 have affected small and medium-sized corporates, including NBFCs and micro finance institutions, in terms of liquidity penetration.

Das said that the surplus liquidity in the banking system has increased rapidly in view of constant government spending. The systemic liquidity surplus, as reflected in net absorption under the Liquidity Adjustment Facility (LAF), averaged Rs 4.36 lakh crore during the period March 27 – April 14, 2020. RBI auctioned three targeted long term repo operations (TLTRO), injected. 75,041 crores cumulatively to mitigate liquidity and financial markets in the banking system.

He said another TLTRO auction worth Rs 25,000 crore was held on 17 April. In response to these auctions, financial conditions have drastically decreased, as has been spread over the instruments of the money and bond markets.

In addition, with the activism in the corporate bond market, many corporates have issued new ones. Das said that there are also signs that mutual funds have faced redemption pressures.

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